House Prices Still Falling
After the huge increases in property values which we have seen over the past few years, where many homes have increased in value by up to 170%, the correction in the housing market is continuing, with the average price of a new home falling by 1.2% for the month to the middle of June.
In monetary terms, this works out at a reduction of £300 per week. Interestingly enough however, through the month of May property prices actually increased by the same amount as this months reduction. This suggests that those individuals selling their homes have finally started to realise that if they want to complete the sale, they are going to have to accept a lower offer on the property.
A large reason for the price reduction is that many potential buyers are particularly cautious at the present time with regard to future property price movements, coupled with the fact that many people are still finding it difficult to obtain a suitable mortgage or in the current economic climate. Also, with the recent rises in inflation and the cost of living, many individuals are reluctant to commit extra money each month on a larger loan on a new home.
In May this year, the average price of a property stood at £242,000. This has now fallen to an average of £239,564, although as usual there are regional variations. London and the South seem to have been worst hit, with average reductions of 1.4% in London and over 2% in the South East and West. In other areas however, prices have actually increased slightly.
Following the credit crunch, lenders are reluctant to grant new loans and mortgages to buyers, as many of them simply do not have the funds to lend and are severely restricting loan to value levels and income multiples, which means that those looking for a new home loan or mortgage will have to find a much bigger deposit. At the same time however, the ratio of potential new buyers to houses has increased to 15 to 1, which means there is still a big demand for property and should be good news for the market once things eventually settle down.
